Tracker mortgages have a variable interest rate that moves roughly in line with the Bank of England Base Rate (BoEBR).

The tracker rate will be quoted as a fixed percentage above the BoEBR and will normally exist for a short period, although it can be attached to the tracker rate mortgage for its entire term.

Once the tracker period expires the interest rate will convert to the lender’s Standard Variable Rate (SVR).

A typical example would be a tracker rate Mortgage that has an interest rate of BoEBR+2% for three years.

The BoEBR is set by the Bank of England Monetary Policy Committee (MPC) each month. The MPC will evaluate a range of economic indicators to decide whether a change in the base rate is necessary to meet the Government’s inflationary policies.

Because the interest rates attached to tracker Mortgages are attached to the BoEBR, any movement will affect borrowers’ monthly repayments.

Upward movements in the BoEBR are usually passed onto borrowers within a few days and downward movements within a month.

Borrowers who do not want to be exposed to such fluctuations should consider applying for a fixed rate mortgage instead.